Subject: File No. S7-09-09
From: William C Jerome

May 29, 2009

"Should we except from the surprise examination requirement advisers that have custody of client funds or securities solely as a result of their authority to withdraw advisory fees from client accounts? "

Yes, you should. From comments in the press, many regulators and politicians assume that the ability to withdraw fees from a client account gives investment advisors a free pass to take all the money.

This isn't true.

My experience (19 years and counting) with, in my case, Charles Schwab and TD Ameritrade, is that they monitor our fee deductions and will refuse to process any requests above a certain amount, in TD Ameritrade's case I believe the current level is 3%. There isn't any way for an advisor using a major third party custodian to 'drain the account' through fees. Before you saddle us with thousands of dollars of costs and many hours of wasted compliance time, I hope someone goes through the effort of finding out if ANY investors have had their assets drained through the fee deduction mechanism. I suspect you will find it doesn't happen, and including advisors who went out of their way to use third party custodians to protect their clients does neither the public nor the advisor community any good.

Thanks for your time. William C. Jerome